Vitiating factors - Non-est-factum

Non-est-Factum

If there is Misunderstanding on the effect of a document (document is fundamentally different to what it was thought to be). 

Elements come from Bradley West Solicitors Nominee Co Ltd v Keeman

Elements

1. Signed the document believing it to have a particular effect.

2. Document has a radically different effect to what is believed.

3. Innocent party was mislead

4. Innocent party was not negligent and acted with reasonable care in the circumstances.

5. Where legal or expert advice was obtained

Outcome if proven: Contract is void as if it never existed.

2. Document has a radically different effect to what is believed.

‘The transaction which the documents purports to effect is essentially different in substance or in kind from the transaction intended’ (Lord Reid in Gallie v Lee) Radically different (Radius v Krishna) Innocent party would not have entered into the contract if they knew what the effect would be (Radius v Krishna)

Not where:  The intended beneficiary is different from that in the document.

3. Innocent party was mislead

Mistaken belief of the signer must be attributable to someone elses misleading explanation or interpretation of the effect or substance of the document. (misleading discription must emanate from another entity not the signer) Must actually be mislead (Bradley West Solicitors v Keeman) Not being given full context or full contract (Radius v Krishna)

4. Innocent party was not negligent and acted with reasonable care in the circumstances.

Signer should refrain from negligently signing the document (e.g. not reading it)

DEFENCE DOES NOT APPLY WHEN:  The signer could have discovered the true meaning of the document if they had exercised caution (not withstanding being misled). (Motor Trade Finance Ltd v Bentinck St. Ltd (2010) Own negligence in signing with haste without proper review is no defence (CF Asset Finance v Okonji)

5. Where legal or expert advice was obtained

• Weakens signers defence 

• Being mislead by your lawyer = no NEF defence -> remedy = suing lawyer for misrepresentation

NEF is not a defence where

Content of the document is accurate, but the person doesn’t understand the language of the document, and thereby misunderstands it Signer misunderstands who the contract benefits but understands the purpose or nature of the document.  Signer is the one that gives the mistaken belief  If signer exercised caution the true meaning could be discovered.  Mistaken about the purpose of which the document would be used but not the nature.  If the advice given by your own lawyer is fault and is what encouraged signing. (Bradley West Solicitors v Keeman) No intention to create legal relations as no contract was ever properly formed (CF Asset Finance Ltd v Okonji)

void means

Contract was never legally valid so is treated as if it never existed

Radius Residential Care Limited v Krishna [example of application and NEF being present.]

Facts

Ratio

Son (Nigel) terminally ill in care facility, Mum (Krishna) was asked to sign a document that was back dated to act as a guarantor. Krishna believed it to be an 'admissions form' back dated to the day he was admitted. In reality it was for her to guarantee payment for his stay at the facility. Signed the forms at the reception of the facility when leaving to catch a flight Krishna did not initial any other page. Was not presented with the whole agreement/contract -> only Nigel's details which was the 1st page She believed that signing as guarantor would be for Nigels luxuries eg toiletries and snacks as the rest was covered by funding

No contract between Radius and Nigel as Nigel was incapable of forming a contract There is however a contract between Ms Krishna + radius because of the clause which stated the Guarantor could be treated as the resident = party to the agreement in her own right Nature of the document was radically different from what she thought she agreed to pay (full fees vs smaller luxuries) Would not have entered into contract otherwise.  Care home receptionist mist lead her on the nature/effect of the document signed  Krishna had taken all reasonable care -> she inquired but was still not told full context.  Defence of NEF established

Bradley West Solicitors v Keeman.

Facts Company owed money to law firm D wanted to buy money in company [law firm lender of money to the company] K wanted to buy shares in the debtor company (law firm lend money to K) Could not raise money to buy shares so agreement was is that law firm would lend more money to the company (X dollars) and K would pay back the additional sum leant to the company (Y dollars) K did not understand that he was going to be responsible for all the debt owed by the company to the law firm ( X+ Y) rather than (Y dollars) the additional debt Y  [which was what he believed]

Ratio Solicitors did not mislead him. = no NEF. Document meant something different from what was thought, he just misunderstood what he signed [mistaken for what he was signed] not mislead by solicitors. He simply wanted to buy shares and he didn't understand what he signed. Can sue Law firm for professional negligence in not advising him the consequence of what he was signing. If the erroneous advice was given by lawyer or advisor not able to claim NEF, solution is not to declare contract void but to sue the advisor.

CF Asset Finance Ltd v Okonji (2014)

Facts Okonji was lawyer Told that document was not transactional but to go to credit assessors to see if she is credit worthy, credit check for ability to pay for things she is buying Told the person she didn’t want to buy but would sign to have the credit checked. The document was used to facilitate a sale and delivery Did not read the document

Ratios Court: she is not a victim of NEF, she hadn't read it and was negligent. Free from contract because person was told by her there was no intention to create legal relations Thus no contract was formed thus contract was unenforceable